California Pension Fund to Engage With Facebook on Governance

Facebook Inc. (FB), the social-networking
company planning an initial public offering, faces corporate-
governance scrutiny from one of its investors, the California
State Teachers’ Retirement System.

“We are in fact in the beginning stages of engagement with
Facebook” over governance issues, Ricardo Duran, a spokesman
for the pension fund, said in an interview. “We are planning to
send them a letter.”

Facebook Chief Executive Officer Mark Zuckerberg controls
56.9 percent of voting power at the social network, which filed
last week to raise $5 billion in an IPO. Corporate-governance
experts have said that the CEO’s majority control puts too much
power in the hands of one person.

Calstrs, the second-largest U.S. pension, has a history of
pushing for changes at companies. It lobbied last year to get
corporations to disclose their political donations. In 2009, the
pension sent a letter to 300 of its largest portfolio companies
asking them to let shareholders have an advisory vote on
executive compensation.

Calstrs is an investor in Facebook through two of its
private-equity managers, Duran said.

Zuckerberg owns 28.4 percent of Facebook, the largest
single stake in the company, and he extended his voting power by
implementing a dual-class stock structure in 2009. Some of his
shares have 10 times more voting power than common stock,
according to Facebook’s IPO filing. The CEO also gained voting
power through agreements with individual stockholders. He owns
an “irrevocable proxy” over those shares, Facebook said.